A framework for an expanded protocol
Since the beginning of RenVM in 2019, a lynchpin for its success has been developing a fee model that incentivises security and stability but is also dynamic enough to thrive regardless of the applications built on it. The model must not only incorporate typically fee structures for the movement of liquidity, but must also encourage Darknodes to contribute their network bandwidth, computational power, and storage space for transactions that do not move liquidity. To handle this, RenVM will be employing a two-tier fee system.
A Fee Model for a Diverse Ecosystem
A percentage fee based on the monetary amount that moves through the network.
The first and most familiar component of the RenVM fee model is the Dynamic Fee. These fees are paid out in the tokens being moved through the network and follow the same logic as a normal exchange fee; based on a percentage of the transaction. For every digital asset exchanged, a small percentage is taken out of the transaction. Regardless of the digital asset in question, Darknodes that power the network receive that native asset as a reward. Users must pay a minimum fee of 0.1% of the moved tokens and users can optionally increase the fee in increments of 0.01% to encourage Darknodes to prioritise their transaction.
An upfront fee for transactions that don’t have a monetary value.
Given the breadth of use cases RenVM can facilitate, there are situations where a dynamic fee as outlined above, is not feasible, for example:
- Transferring of non-fungible tokens (NFTs)
- Performing general-purpose computations in secret
The exact fee is dependent on the amount of data required, the amount of work required, and how much the user wants to be prioritised but the formula for determining this is 0.000005 DAI / second / Darknode and 0.0000002 DAI byte / Darknode. This is an approximation based on the current costs of operating a Darknode with the recommended hardware specifications. However, this is subject to changes as the general purpose scripting capabilities of RenVM are developed.
To properly assess costs for both parties, the Ren team has chosen the Dai stablecoin as our core payment mechanism for the upfront fee. To know why we chose Dai, please read our companion blog which can be found here.
How Fees are Distributed
We released Darknodes earlier this year to refine the economics of our system in the real world, receive feedback from operators and determine what parameters will optimise our network for stability and security. We’ve synthesised the feedback and opted for the following:
- Fees are paid immediately to the Darknode payment contract (there is no delay between payment and work done by the Darknodes).
- Fees will be distributed to Darknodes at the end of each cycle (approximately once per month) and will be split evenly amongst all Darknodes that were actively participating during that month.
- A Darknode will not receive fees for cycles in which they are inactive, become active mid-cycle, or go offline mid-cycle. Darknodes must maintain uptime for the entire cycle to receive the rewards distribution.
Our network stability and equitable Darknode remuneration are of the utmost importance and these parameters have been put in place to maintain these core principles.
One thing that we have worked very hard towards is ensuring that end users can have the smoothest possible experience when interacting with applications built on RenVM. To that end, all of the fees and gas required by RenVM are built in such a way that applications can opt-in to hiding these fees from the user by leaning on ideas similar to Ethereum’s Universal Login. Future blog posts will explore this idea more extensively, and our developer tools will support it out-of-the-box.
The above fee model is now live and all transactions running through RenVM are subject to this framework. To accompany these changes, a few housekeeping items:
- Darknode and Darknode CLI Updates will be released to the public in the coming days, so please stay tuned to ensure your Darknode is up to date.
- The Darknode Handbook has an in-depth overview of how fees are distributed.
- The Darknode Command Centre has been updated to receive all types of rewards and will continue to allow fees previously earned to be withdrawn.
After much in-house research and input from other leaders in this industry, we are looking forward to seeing this new model in action, balancing sustainability and security for Ren.
Until next time,
— Loong Wang, CTO, Ren
Ren is a private and interoperable liquidity layer for decentralized finance. Freely move value between blockchains and transfer tokens in zero-knowledge while maintaining complete privacy.